IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-05623198.html

Climate Risk and Capital Structure

Author

Listed:
  • Edith Ginglinger

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Quentin Moreau

    (HKUST - Hong Kong University of Science and Technology)

Abstract

We use firm-level data that measure forward-looking physical climate risk to examine the impact of climate risk on capital structure. We find that greater physical climate risk leads to lower leverage in the post-2015 period (i.e., after the Paris Agreement and the first step of standardization of disclosure of climate risk information). Our results hold after controlling for firm characteristics known to determine leverage, including credit ratings. Our evidence shows that the reduction in leverage related to climate risk is shared between a demand effect (the firm's optimal leverage decreases) and a supply effect (bankers and bondholders increase spreads when lending to firms with the greatest risk). Our results are consistent with the hypothesis that physical climate risk affects leverage via larger expected distress costs and higher operating costs. This paper was accepted by Colin Mayer, Special Section of Management Science on Business and Climate Change. Funding: This project benefited from the financial support of the Institut Europlace de Finance (Grant EIF 2019). Q. Moreau acknowledges financial support from the French Association of Institutional Investors. The authors have received in-kind support from Carbone 4 for this project in the form of a data set of climate risk ratings. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4952 .

Suggested Citation

  • Edith Ginglinger & Quentin Moreau, 2023. "Climate Risk and Capital Structure," Post-Print hal-05623198, HAL.
    • Handle: RePEc:hal:journl:hal-05623198
    DOI: 10.1287/mnsc.2023.4952
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Yishuang & Dong, Hanmin, 2026. "Barrier or driver: Patent thickets in the path of technological transition," Energy Policy, Elsevier, vol. 210(C).
    2. Arcidiacono, Daniele & Fraccalvieri, Giuseppe & Caragnano, Alessandra & Frascati, Domenico, 2026. "ESG controversies and the cost of debt and equity: Evidence from Europe," Finance Research Letters, Elsevier, vol. 93(C).
    3. Hai Hong Trinh, 2026. "Biodiversity risk and corporate default probability," Risk Management, Palgrave Macmillan, vol. 28(2), pages 1-39, May.
    4. Xiaonan Sun & Fanghui Ci & Javier Cifuentes‐Faura & Xiaoqian Liu, 2024. "Firm‐level climate risk and corporate violations: Perspective of corporate managers' pressure perception," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(8), pages 5430-5448, December.
    5. Skander Maraoui & Olivier de Bandt, 2026. "The Credit Channel of Acute vs Chronic Climate Change-Related Risk," Working papers 1048, Banque de France.
    6. Sahu, Asis Kumar & Debata, Byomakesh & Dash, Saumya Ranjan, 2026. "Firm-level climate risk and corporate investment efficiency: Evidence from a middle-income economy," Finance Research Letters, Elsevier, vol. 91(C).
    7. Zhang, Chuanhai & Zheng, Zhongjie & Bing, Tao, 2026. "The impact of climate risk on municipal bonds pricing: Evidence from Chinese Chengtou bonds," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    8. Deng, Xiaomeng & Zhang, Pengwei & Wu, You, 2026. "Threat or opportunity: Biodiversity risk and corporate investment," Finance Research Letters, Elsevier, vol. 89(C).
    9. Cao, Zhen & Gao, Qiang & Wang, Shijie & Wang, Yuanzhi, 2026. "News implied volatility and corporate leverage," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    10. Tang, Qirui & Fang, Yi, 2026. "How do extreme climate risks affect banking active risk-taking? Empirical evidence from 107 countries," Research in International Business and Finance, Elsevier, vol. 82(C).
    11. Cheng, Xi & Li, Jun & Feng, Chao, 2025. "The impact of extreme precipitation and flooding risk on corporate investment: Does government disaster preparedness matter?," Economic Analysis and Policy, Elsevier, vol. 88(C), pages 926-946.
    12. Kong, Xiaolin & Boubaker, Sabri & Jiang, Yong & Ren, Yi-Shuai, 2026. "Climate risk and internal pay gap," Finance Research Letters, Elsevier, vol. 92(C).
    13. Yahya, Farzan & Lee, Chien-Chiang, 2026. "Assessing the role of central banks in addressing financial sector carbon emissions," Research in International Business and Finance, Elsevier, vol. 84(C).
    14. Li, WeiWei & Padmanabhan, Prasad & Huang, Chia-Hsing, 2026. "Climate risk and asset-liability maturity mismatches," Global Finance Journal, Elsevier, vol. 69(C).
    15. Kai Li & Yifang Xiao & Shaozhou Qi & Xunpeng Shi & Kun Qin, 2026. "“Climateflation” in China: Could Rising Temperatures Overheat the Economy?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 34(1), pages 108-137, January.
    16. Huynh, Nhan & Phan, Hoa & Paquette, Kyle & Thi Thu Vu, Phuong, 2026. "Sovereign credit ratings, fiscal burden and corporate investment policies: An international evidence," Research in International Business and Finance, Elsevier, vol. 82(C).
    17. Egbétoké, Amétépé & Ureche-Rangau, Loredana, 2026. "Vulnerability to climate change and funding squeeze in Sub-Saharan Africa," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 107(C).
    18. Wei, Feng & Xie, Huixuan & Yip, Chi Man, 2026. "Environmental regulatory spillovers in conglomerates: Quasi-experimental evidence on subsidiary leverage in China," Finance Research Letters, Elsevier, vol. 88(C).
    19. Xiaoqi Sheng & Jun Shao, 2026. "Digital transformation and enterprise resilience in Chinese listed firms: evidence from information transfer efficiency," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 13(1), pages 1-18, December.
    20. Liu, Rumeng & Deng, Chao & Chen, Keyuan & Deng, Huimin, 2026. "Managerial Green Preferences and the Allocation of Patient Capital," Finance Research Letters, Elsevier, vol. 91(C).
    21. Wang, Haiying & Luo, Ting & Jiang, Chonghui & Du, Jiangze, 2026. "Which companies are most at low-carbon transition risks? Evidence from ripple effects in multi-order moments," International Review of Financial Analysis, Elsevier, vol. 110(C).
    22. Xuefeng Li & Le Luo & Qingliang Tang, 2024. "Climate risk and opportunity exposure and firm value: An international investigation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(6), pages 5540-5562, September.
    23. Chen, Geng & Han, Yikai, 2026. "Does customer's climate risk disclosure affect supplier's cash holdings? Evidence from China's listed firms," International Review of Economics & Finance, Elsevier, vol. 106(C).
    24. Ning, Zihao & Xu, Zhibo, 2026. "Climate policy uncertainty and corporate trade credit provision," Research in International Business and Finance, Elsevier, vol. 83(C).
    25. Yi Zhou, 2026. "Using Generative AI to predict the weather impact on future stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 66(4), pages 1569-1606, May.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-05623198. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.